Insurance is important because it protects you against the risk of the unknown. You probably would not even consider not having homeowner’s or auto insurance, but you might not know what kind of insurance you need. Insurance is there to help you if you cannot afford to pay out of your pocket to set right something that has gone wrong, like a car accident, a tree in your yard falling on a neighbor’s house, the medical costs of a serious illness, or the death of a spouse.
Life Insurance Policies to Choose From
Under most circumstances, you need life insurance to protect your surviving family, who depend on your income. The overwhelming majority of Americans are drastically underinsured in the event of premature death. Buying life insurance for a stay-at-home parent is useful, too. Although it does not protect the family from their loss of income, it can help offset the additional costs that it would take to replace that stay-at-home parent’s services. For example, replacing the services of a stay-at-home mom caring for a three-year-old and a newborn would cost $30,000 per year or more to hire a full-time nanny until the kids are in school. In addition, the children would need after-school care for several more years, and you might need a number of other domestic services, too. All these expenses add up to $250,000 or more of life insurance needed on the stay-at-home parent. Fortunately, term life insurance is quite affordable, presuming that you’re fairly healthy. The cost of a high-quality, 20-year level term life insurance policy on a young mother may cost $300 to $400 per year.
Health Insurance is Needed
Nearly one in five Americans under age 65 has no health insurance. Over half these people state cost as the reason. Almost 25% of uninsured people lost their health insurance when they lost or changed jobs. The unfortunate thing about insurance is that if you can’t afford the premium, you definitely won’t be able to afford bearing the risk yourself. Medicare or your health insurance policy will not pay for long-term care expenses. These expenses are covered in one of three ways: self pay, long-term care insurance, or Medicaid. Consider purchasing long-term care insurance the day before you are going to need it. Unfortunately, you cannot know what day that will be, so purchasing long-term care insurance between ages 50 and 65 is a good idea. The price of the insurance goes up as you get older, and the likelihood of needing long-term care insurance increases.
Auto Insurance to Purchase
If you own a vehicle and ever let it out of the garage, you must have auto insurance. Depending on the value of your vehicle and the state’s requirements, the type of automobile insurance you should carry will vary.
If you own a home and you have a mortgage, you must maintain adequate homeowner’s insurance protection. Your mortgage company requires it. Even if you own your home outright, you still need to have homeowner’s insurance to replace or repair the things that are too expensive or impossible to pay for yourself. You also have some liability insurance protection provided with both your auto and homeowner’s insurance coverage, but you may also determine that additional liability insurance is warranted. Liability insurance pays for legal fees and damages if you hurt someone or cause injury due to your negligence.